The Muddled Case for Trade Agreements
PRINCETON – With
global trade negotiations deadlocked for years, regional agreements –
long a dormant route to trade liberalization – are back with a
vengeance. The United States is at the center of two mega-deals that
could shape the future path of world trade.
global trade negotiations deadlocked for years, regional agreements –
long a dormant route to trade liberalization – are back with a
vengeance. The United States is at the center of two mega-deals that
could shape the future path of world trade.
The Trans-Pacific Partnership
(TPP) is further along, and involves 11 countries, besides the US, that
collectively produce as much as 40% of global output; but China,
crucially, is not among them. The Transatlantic Trade and Investment Partnership
(TTIP) with the European Union has an even more ambitious reach,
promising to join two giant regions that together account for half of
world trade.
(TPP) is further along, and involves 11 countries, besides the US, that
collectively produce as much as 40% of global output; but China,
crucially, is not among them. The Transatlantic Trade and Investment Partnership
(TTIP) with the European Union has an even more ambitious reach,
promising to join two giant regions that together account for half of
world trade.
Trade agreements have
long stopped being the province of experts and technocrats. So it is
not surprising that both initiatives have generated significant and
heated public discussion. The perspectives of proponents and opponents
are so polarized that it is hard not to be utterly confused about the
likely consequences. To appreciate what is at stake, we have to
understand that these deals are motivated by a mix of objectives – some
benign, others less so from a global perspective.
long stopped being the province of experts and technocrats. So it is
not surprising that both initiatives have generated significant and
heated public discussion. The perspectives of proponents and opponents
are so polarized that it is hard not to be utterly confused about the
likely consequences. To appreciate what is at stake, we have to
understand that these deals are motivated by a mix of objectives – some
benign, others less so from a global perspective.
On the economic
front, the trade agreements’ defenders tend to talk with both sides of
their mouth. Reducing trade barriers is said to promote economic
efficiency and specialization; but it is also supposed to increase
exports and create jobs by increasing access to trade partners’ markets.
The first of these is the conventional comparative-advantage argument
for trade liberalization; the second is a mercantilist argument.
front, the trade agreements’ defenders tend to talk with both sides of
their mouth. Reducing trade barriers is said to promote economic
efficiency and specialization; but it is also supposed to increase
exports and create jobs by increasing access to trade partners’ markets.
The first of these is the conventional comparative-advantage argument
for trade liberalization; the second is a mercantilist argument.
Dani Rodrik
Dani Rodrik is Professor of Social Science at the Institute for Advanced Study, Princeton, New Jersey. He is the author of One Economics, Many Recipes: Globalization, Institutions, and Economic Growth and, most recently, The Globalization Paradox: Democracy and the Future of the World Economy.
